NEWS Finance        10/08/2020

BDDK lowers relaxes loan-to-assets ratio

The Turkish banking watchdog, the Banking Regulation and Supervision Agency (BDDK), has relaxed the loan-to-assets ratio for deposit banks, by mandating that the ratio be lowered to 95%, formerly 100%. The relaxing of the stimulation policy follows further devaluation of the Turkish Lira against the US dollar.


Defined as the ratio of a bank’s outstanding loans to their total assets, a loan-to-assets ratio indicates a bank’s liquidity and liability against default loans. The higher a loan-to-assets ratio, the more loans and investment a bank has given out, and the higher their liability. By mandating deposit banks to maintain a 100 percent loan-to-assets ratio, the BDDK aimed to pump assets back into the economy, keeping it afloat during the pandemic.


The BDDK has additionally lowered the mandated loan-to-assets ratio to 75% from 80% for participation banks, and has revised the regulation regarding the calculation of loans in foreign currencies, basing the Turkish Lira equivalent on the previous month’s average instead of the current rates.


Furthermore, the BDDK removed a coefficient of 1.75 to any portion of forex deposits located outside of Turkey, that exceeds the level of forex loans handed out.


Finally, the definition of securities included in the loan-to-assets ratio was expanded to include real estate investment funds and venture fund contributions.


The BDDK’s press release was as follows:  


“According to Banking Law No. 5411 Articles 93 and 43/2, Board of the Banking Regulation and Supervision Agency resolutions dated and numbered 18.04.2020- 9000, 30.04.2020- 9003 and 29.05.2020-9042 had required that Assets ratio must be calculated by banks and monthly average of the ratio shall not fall below 100% for the deposit banks and 80% for the participation banks as of the end of each month. In addition, it is deemed appropriate that the requests from banks for these Board resolutions taken under pandemic conditions should be considered within the framework of the normalization steps and Board’s resolutions regarding the Asset Ratio (AR) calculation; as of 01.08.2020, it has been decided;


  1. The AR, which was determined as 100% for deposit banks and 80% for participation banks in the Board Decision No. 9000, should be regulated as 95% and 75% respectively, and within this scope;

** monthly average of the AR ratio shall not fall below 95% for the deposit banks and 75% for the participation banks as of the end of each month,

** the excess amount to be taken as basis in accordance with Article 148/1(a) for deposit banks with AR value below 95% and for participation banks with AR value below 75% which is in failure in compliance with stated AR, shall be calculated as the amount of change in nominator that will bring the ratio respectively to %95 or %75 by the end of the relevant month,


2- The average rate of Central Bank of the Republic of Turkey (CBRT) foreign exchange buying which realized in the previous month of the calendar announced by BRSA shall be taken into account to convert all FX items included in the nominator and denominator of AR to TL for the current month at the ratio calculation date,


3- Funds granted to Real Estate Investment Funds and Venture Capital Investment Funds shall be included in the "Securities" item in the nominator of AR,


4- Coefficient of 1.75 applied to the part of the total of FX Deposits that exceed FX Loans mentioned in Board Resolution numbered 9042 shall not be applied to funds provided from foreign individuals and entities, including KKTC (Republic of Northern Cyprus) residents,


5- AR formula is revised as follows:

Assets Ratio (AR) = Loans + (Securities x 0.75*) + (CBRT Swaps x 0.5) divided by TRY Deposit + (FX Deposit x 1,75**)

* monthly average of the AR ratio must be 95% for the deposit banks and 75% for the participation banks as of the end of each month,

** coefficient of 1 shall be applied to FX Deposit up to the amount of FX Loans


6- This decision should be submitted to the Banks Associations and published on the Agency’s website.”


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